Every business in their lifetime must receive or deal with an invoice, one of the essential financial documents. But how long can they have an important role in the age of digitisation? Procurement and supply chain needs to handle a myriad of these documents to operate a business, no matter their size. As we scale up, we can see how the number of invoices grows.
The Billentis report defines two major types of invoices
Invoices in the narrow legal sense: Bills/invoices with full content and authentication of issuer and receipt. Typically issued by accounting systems. Basis for electronic transmission and automated processing.
Invoices in the broader legal sense: 'Simplified low value' bills/invoices without customer authentication. E.g., payment receipts, tickets, etc. Typically, anonymously issued by cash registers at points of sale. Not suited for automated electronic transfer and automated management.
Our article will discuss the first group and refer to them as invoices.
The Covid-19 pandemic brought change to our economy, where many players in the global supply chain needed to evolve to overcome the difficulties.
One of these was that B2B businesses started to sell their products and services online, which provided an ever-growing need for optimisation.
Problems around invoices:
Even though the format is almost as old as the economy, it still possesses some problems that have only escalated with technological development.
The first and foremost problem that comes to mind is missing invoices. Many of them are still mailed in paper form, leading to disappearance or delayed transactions. Paper-based invoicing is the least compliant and unsustainable way of handling transactions. Another problem can occur from missing or incorrect data on the invoice, causing further delays and extra labour for accountants. All of these can pump up the cost of invoice handling on both the buyers' and the suppliers' sides.
If done right, you can save many resources for your business. Processing your invoices can mean the following steps:
The supplier sends the invoice
Accounting or procurement validates whether the invoice is legitimate.
The invoice goes through the approval flow
Finance onboards the supplier
Payment of the supplier
Payment is recorded in the ledger
This critical process depends on many players in your business and is strongly connected to your cash flow. It can stall the operation if the ineffective workflow causes missing or is late execution. It is common that purchases can halt, starting a chain reaction that causes severe problems for the whole supply chain.
How to automate the process